Bank War

The Bank War was a political struggle over the Second Bank of the United States, which occurred from 1832 to 1836. The bank, which had 29 branches, handled the federal government's deposits, extended credit and loans, and issued banknotes (by 1830, the country's most stable currency). President Andrew Jackson believed that the Bank concentrated undue economic power in the hands of a small elite, and his Jacksonian Democrats opposed the rechartering of the bank. National Republican/Whig senators Daniel Webster and Henry Clay decided to force the issue, convincing the bank to apply for charter renewal in 1832, well before the fall election. Congress voted to renew, and Jackson issued his veto. His veto opposed the privileges of the moneyed elite who oppressed the democratic masses in order to enrich themselves. Clay and his supporters found Jackson's economic ideas and class antagonism absurd, and Clay ran for president in 1832.

However, Jackson's egalitarian ideals resonated with many Americans, and he won 55% of the popular vote and 219 electoral votes to Clay's 49. Jackson's Democratic Party still controlled the US Congress, so no override was possible, and the Second Bank ceased to exist after 1836. Jackson had the sizeable federal deposits removed from its vaults and redeposited into Democratic-inclined state banks, leading to the Bank raising interest rates and calling in loans. This led to an economic decline 1833, enhancing Jackson's claim that the bank was too powerful for the good of the country.

In 1834, the unregulated economy went into high gear, and an excess of silver from Mexican mines led to bankers printing ever more banknotes. This led to inflation, which led to the prices of basic goods rising more than 50%. States chartered hundreds of new private banks with new banknotes, and the webs of credit and debt grew denser. By 1836, 20,000,00 acres of western land had been sold, and slave owners rushed to southern Mississippi and Louisiana to bring the land under cultivation. From 1835 to 1837, for the only time in American history, the government had a monetary surplus, leading to a brief boom before the bubble burst in the Panic of 1837.